The growth of climate-warming gases in coming decades will mostly originate in developing countries trying to spur economic growth and reduce poverty by boosting energy use, Kartha said. Any agreement that doesn't address that reality is destined to fail, he added. Power plants, refineries and vehicles together are the main source of manmade CO2.

``Developing countries' emissions are the real challenge to climate change,'' said Sivan Kartha, the institute's energy director.. ``And most poverty results from a lack of access to energy services. Traditionally, that has been addressed by fossil fuels,'' which add CO2 to the atmosphere.

The proposal, which has not been adopted by any country negotiating in the current United Nations-sponsored talks, considers both national income and overall emissions to quantify a nation's contribution to overall CO2 cuts. Rich countries wouldn't be able to meet their targeted levels by simply reducing output domestically and would be obliged to pay for clean-energy development in poorer nations, under the plan.

The law calls for closer monitoring of resource-intensive and heavily polluting industries such as steelmaking, non-ferrous metal production, power generation, oil refining, construction and printing, the Xinhua news agency said.

It will encourage industries to adopt water-saving technologies and use cleaner sources of energy such as natural gas and alternative fuels.

It also promotes recycling or making use of waste materials, including the recycling of maize straw, livestock waste and farming by-products to produce marsh gas.

China consumed 1.16 tonnes of coal equivalent for every 10,000 yuan of GDP in 2007, down 3.66 percent from 2006, and the government has set a 2010 target of reducing energy consumption per unit of GDP by 20 percent and emissions of major pollutants by 10 percent from 2005 levels, Xinhua said.

Prime Minister Yasuo Fukudo has touted a set of emissions-reduction measures in recent months, of which the Ministry has now announced its financial support. However, the ministry's budget will still need to go through other regulatory processes and receive approval from the legislature before taking effect in the new fiscal year, beginning in April 2009.

In June, Fukuda pledged to cut Japan's greenhouse gas emissions by between 60 percent and 80 percent from the country's current levels by 2050.

The prime minister's master plan includes a carbon-emissions-trading program, in which companies that can't meet emissions limits can buy credits from those who have lower emissions. This type of program is already in place in other parts of the world.

The European Union has a carbon-trading program in place and sets carbon emissions caps for different industries. A consortium of 10 states in the eastern United States plans to enact a carbon-trading program on January 1, 2009.